The discussion and analysis of our financial condition and results of operations
are based on our financial statements, which we have prepared in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements, as well as the reported revenues and expenses during the reporting
periods. On an ongoing basis, we evaluate estimates and judgments, including
those described in greater detail below. We base our estimates on historical
experience and on various other factors that we believe are reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.
As used in this "Management's Discussion and Analysis of Financial Condition and
Results of Operation," except where the context otherwise requires, the term
"we," "us," "our," or "the Company," refers to the business of TraQiQ Inc.
16
Overview
TraQiQ was incorporated in the State of California on September 9, 2009 as
Thunderclap Entertainment, Inc. On July 14, 2017, Thunderclap Entertainment,
Inc. changed its name to TraQiQ, Inc. On July 19, 2017, the Company entered into
a Share Exchange Agreement with the stockholders of OmniM2M, Inc. ("OmniM2M")
and TraQiQ Solutions, Inc. dba Ci2i Services, Inc. (formerly Ci2i Services, Inc.
- amended November 6, 2019) ("Ci2i") whereby the stockholders of OmniM2M and
Ci2i agreed to exchange all of their respective shares, representing 100%
ownership in OmniM2M and Ci2i in exchange for 1,500,000 shares of the Company's
common stock, respectively. The OmniM2M Shareholders and the Ci2i Shareholders
were issued their respective 1,500,000 shares on a pro rata basis based on their
respective holdings in OmniM2M and Ci2i in the Share Exchange Agreement. The
Share Exchange was accounted for as a reverse merger whereas Ci2i is considered
the accounting acquirer and TraQiQ, Inc. is considered the accounting acquiree.
Accordingly, the consolidated financial statements included the accounts of Ci2i
for all periods presented and the accounts of TraQiQ, Inc. and OmniM2M, which
was acquired by the Company on July 19, 2017 since the date of acquisition. For
accounting purposes, the acquisition of OmniM2M is recorded at historical cost
in accordance with Accounting Standard Codification ("ASC") 805-50-25-2 as this
is considered an acquisition of entities under common control as the management
of the Company and OmniM2M control the activities of the respective companies.
Prior to the merger with Ci2i and acquisition of OmniM2M, the Company was
considered a shell company under Rule 12b-2 of Exchange Act. On December 1,
2017, the Company entered into a Share Purchase Agreement with Ajay Sikka
("Sikka"), the sole shareholder of Transport IQ, Inc. whereby Sikka sold all of
the shares in TransportIQ, Inc. ("TransportIQ") in exchange for $18,109, in the
form of cancellation of all of the debt of TransportIQ that was owed to the
Company. The transaction became effective upon the execution of the agreement by
Sikka and the Company; and Transport IQ, Inc, is now a wholly-owned subsidiary
of the Company. Because TransportIQ was commonly controlled and owned, the
transaction was recorded at the historical carrying value of TransportIQ's
assets and liabilities.
Ci2i is a services company founded in 1998 that develops and deploys intelligent
technologies and products in order to meet the demand for sustainable,
integrated solutions. Ci2i's primary focus has been in the analytics and
intelligence segments. The Company is investing significantly in building
products in the area of supply chain and last mile delivery.
On May 16, 2019, the Company entered into a Share Exchange Agreement with TRAQIQ
Solutions Private Limited (TraQ Pvt Ltd), formerly known as Mann-India
Technologies Pvt Ltd. Pursuant to the agreement, the Company acquired 100% of
the shares of TRAQ Pvt Ltd. and assumed certain net liabilities in exchange for
warrants exercisable over five-years to purchase up to 166,159 shares of common
stock of the Company valued at $268 at an exercise price of $0.0008. The
warrants are exercisable as follows: (i) 12,596 warrants immediately upon
closing; (ii) 107,494 warrants exercisable one-year after the date of closing;
and (iii) 46,069 warrants exercisable two-years after the date of closing. This
transaction is being recorded as a business combination under ASC 805.
The warrants that are exercisable in one-year and two-years were conditioned
upon TRAQ Pvt Ltd. achieving certain revenue figures and pre-tax profit
percentages. For the warrants to become exercisable, TRAQ Pvt Ltd. was required
to achieve target revenue of $1.1 million and pre-tax profit of 25% in 2019 and
2020, respectively, with the amount of such warrants becoming exercisable
reduced proportionally to the extent TRAQ Pvt Ltd. failed to achieve these
targets. A total of 52,391 of these warrants were cancelled effective May 16,
2021 as a result of these criteria not being achieved. There were 56,400 of
these warrants exercised during 2021 and 57,368 warrants remain outstanding as
of December 31, 2021.
Effective December 31, 2020, Ci2i acquired the net assets of OmniM2M and
TransportIQ, and then dissolved those entities in January 2021. The value of
those transactions were for the assumed liabilities of Omni and TransportIQ, and
no cash was exchanged.
On January 22, 2021, the Company entered into a Share Exchange Agreement with
Rohuma, LLC, a Delaware limited liability company ("Rohuma") and its members,
whereby the Rohuma members agreed to exchange all of their respective membership
interests in Rohuma in exchange for up to 536,528 shares of common stock, of
which the first tranche of 320,285 shares was issued upon closing on March 1,
2021, with the remaining value reflected as contingent consideration until the
shares vest at which time they will be issued. Issuance of the remaining shares
is contingent upon Rohuma achieving certain revenue targets for the calendar
years 2021 and 2022. The Company is making final determination on the revenue
targets to ascertain that the second tranche of shares should be issued.
17
The transaction was valued at $3,433,776 ($6.40 per share). Rohuma has an Indian
affiliate that is owned 99% by Rohuma and 1% by its founding member. Rohuma
controls this entity and the 1% ownership by the member is now less than 1% upon
acquisition by the Company. This amount is reflected as a non-controlling
interest.
Rohuma dba Kringle.ai is a California based software solutions company that
enables digital and mobile commerce by providing enterprise class applications
that cover loyalty and rewards products, payments, online ordering, distribution
logistics for retail and more. Kringle analyzes customers' omni-channel
behaviors and transactions. Using AI for digital commerce, Kringle is able to
deliver real time, automated 1:1 recommendations and personalized content across
all customer touch points.
On February 17, 2021, the Company entered into a Share Exchange Agreement with
Mimo Technologies Private Ltd., an Indian corporation ("Mimo"), and its
shareholders, whereby the Mimo shareholders exchanged all of their respective
shares in Mimo for warrants to purchase up to 170,942 shares of the Company's
common stock. Of these warrants, 102,565 were earned at the date of acquisition,
with the remaining 68,377 warrants to be earned during the remainder of 2021 and
2022 subject to Mimo meeting certain revenue goals for 2021 and 2022. The
Company is making final determination on the revenue targets to ascertain that
the second tranche of warrants should be vested. The warrants have a term of
three years and an exercise price of $0.008 and value in the amount of
$1,640,447, of which $984,268 is reflected in additional paid in capital, with
the remaining $656,179 reflected as contingent consideration. In addition to the
issuance of the warrants, TRAQ Pvt Ltd, wrote off $258,736 in amounts due from a
note receivable, $123,778 in accounts receivable and $40,354 in a debenture from
Mimo. In addition, the Company made a cash payment to one of the minority
shareholders of Mimo in the amount of $22,338. The Company acquired over 99% of
Mimo with the remaining percentage of less than 1% reflected as a
non-controlling interest.
Mimo provides delivery and task worker solutions across India. Mimo works with
Banking, Financial, Logistics and Distribution companies, to take their products
and services to semi-urban and rural India. Mimo trains the agents in each
Product or Service through an online and classroom training platform.
Going Concern
The Company has an accumulated deficit of $8,953,768 and a working capital
deficit of $9,844,269 as of December 31, 2021, compared to a working capital
deficit of $3,168,246 as of December 31, 2020. The Company's continuation as a
going concern is dependent on its ability to generate sufficient cash flows from
operations to meet its obligations, which it has not been able to accomplish to
date, and/or obtain additional financing from its stockholders and/or other
third parties.
Our consolidated financial statements have been prepared on a going concern
basis, which implies the Company will continue to meet its obligations and
continue its operations for the next fiscal year. The continuation of the
Company as a going concern is dependent upon the ability of the Company to
obtain necessary equity or debt financing to continue operations, successfully
locating and negotiating with other business entities for potential acquisition
and /or acquiring new clients to generate revenues. The consolidated financial
statements of the Company do not include any adjustments that may result from
the outcome of the uncertainties.
In order to further implement its business plan and satisfy its working capital
requirements, the Company will need to raise additional capital. There is no
guarantee that the Company will be able to raise additional equity or debt
financing at acceptable terms, if at all.
There is no assurance that the Company will ever be profitable. These
consolidated financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classifications of liabilities that may result should the
Company be unable to continue as a going concern.
Critical Accounting Policies and Estimates
Our significant accounting policies are more fully described in the notes to our
consolidated financial statements. Those material accounting estimates that we
believe are the most critical to an investor's understanding of our financial
results and condition are discussed immediately below and are particularly
important to the portrayal of our financial position and results of operations
and require the application of significant judgment by our management to
determine the appropriate assumptions to be used in the determination of certain
estimates.
18
Consolidation
The consolidated financial statements include the accounts of TraQiQ, Inc. and
its wholly-owned subsidiaries. All intercompany balances and transactions have
been eliminated in consolidation.
The Company applies the guidance of Topic 810 Consolidation of the Financial
Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") to
determine whether and how to consolidate another entity. Pursuant to ASC
paragraph 810-10-15-10, all majority-owned subsidiaries-all entities in which a
parent has a controlling financial interest-are consolidated except when control
does not rest with the parent.
Pursuant to ASC paragraph 810-10-15-8, the usual condition for a controlling
financial interest is ownership of a majority voting interest, and, therefore,
as a general rule ownership by one reporting entity, directly or indirectly, of
more than 50 percent of the outstanding voting shares of another entity is a
condition pointing toward consolidation. The power to control may also exist
with a lesser percentage of ownership, for example, by contract, lease,
agreement with other stockholders, or by court decree.
Noncontrolling Interests
In accordance with ASC 810-10-45 Noncontrolling Interests in Consolidated
Financial Statements, the Company classifies noncontrolling interests as a
component of equity within the consolidated balance sheet. In January 2021, the
acquisition of Rohuma resulted in a less than 1% non-controlling interest of the
Indian affiliate of that company. In February 2021, the acquisition of Mimo
resulted in a less than 1% non-controlling interest of that company.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting periods. These estimates include, but are not
limited to, management's estimate of provisions required for non-collectible
accounts receivable, depreciative lives of our assets, determination of
technological feasibility, and valuation allowances of our deferred tax assets.
Actual results could differ from those estimates.
Capitalized Software Costs
In accordance with the relevant FASB accounting guidance regarding the
development of software to be sold, leased, or marketed, the Company expenses
such costs as they are incurred until technological feasibility has been
established, at and after which time these costs are capitalized until the
product is available for general release to customers. Once the technological
feasibility is established per ASC 985-20, the Company capitalizes costs
associated with the acquisition or development of major software for internal
and external use in the balance sheet. Costs incurred to enhance the Company's
software products, after general market release of the services using the
products, is expensed in the period they are incurred. The Company only
capitalizes subsequent additions, modifications or upgrades to internally
developed software to the extent that such changes allow the software to perform
a task it previously did not perform. The Company expenses software maintenance
and training costs as incurred.
Revenue Recognition
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with
Customers (Topic 606), specifically ASC 606-10-50-12. This standard provides a
single set of guidelines for revenue recognition to be used across all
industries and requires additional disclosures. The updated guidance introduces
a five-step model to achieve its core principal of the entity recognizing
revenue to depict the transfer of goods or services to customers at an amount
that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. The Company adopted the updated guidance
effective January 1, 2018 using the full retrospective method, however the new
standard did not have a material impact on its consolidated financial position
and consolidated results of operations, as it did not change the manner or
timing of recognizing revenue.
19
Professional Service Revenue
TRAQ Pvt Ltd. generally derives a large part of its revenues from professional
and support services, which includes revenue generated from software development
projects and associated fees for consulting, implementation, training, and
project management provided to customers using their systems. Revenue from
arrangements with customers is recognized based on the Company's satisfaction of
distinct performance obligations identified in each agreement, generally at a
point in time as discussed in ASC 606. In instances where multiple performance
obligations are identified, the Company allocates the transaction price to each
performance obligation based on relative selling prices of each distinct product
or service, and recognizes revenue related to each performance obligation at the
points in time that each performance obligation is satisfied. The Company's
performance obligation includes providing customization of software and the
selling of licenses, where the Company typically satisfies its performance
obligations prior to the submission of invoices to the customer for such
services. The Company's performance obligation for consulting and technical
support is delivered on as the work is being performed, which is satisfied prior
to invoicing. The Company generally collects payment within 30 to 60 days of
completion of the performance obligation and there are no agency relationships.
Software development arrangements involving significant customization,
modification or production are accounted for in accordance with the appropriate
technical accounting guidance issued by the FASB using the percentage-of-
completion method. The Company recognizes revenue using periodic reported actual
hours worked as a percentage of total expected hours required to complete the
project arrangement and applies the percentage to the total arrangement fee.
Unbilled revenue represents earnings in excess of billings as at the end of the
reporting period. Sales taxes collected from customers and remitted to
governmental authorities are accounted for on a net basis and therefore are
excluded from revenues in the statements of operations.
TRAQ Pvt Ltd. has deferred the revenue and costs attributable to certain process
transition activities with respect to its customers where such activities do not
represent the culmination of a separate earnings process. Such revenue and costs
are subsequently recognized ratably over the period in which the related
services are performed. Further, the deferred costs are limited to the amount of
the deferred revenues.
TRAQ Pvt Ltd. has now started offering an integrated solution for supply chain
and last mile. This product called "TraQSuite" is now offered in multiple
markets as a cloud-based subscription offering. This is a significant
improvement from the earlier professional services business.
Software Solution Revenue
Revenue from arrangements with customers is recognized based on the Company's
satisfaction of distinct performance obligations identified in each agreement,
generally at a point in time as discussed in ASC 606. In instances where
multiple performance obligations are identified, the Company allocates the
transaction price to each performance obligation based on relative selling
prices of each distinct product or service, and recognizes revenue related to
each performance obligation at the points in time that each performance
obligation is satisfied. The Company's performance obligation includes providing
connectivity to software, generally through a monthly subscription, where the
Company typically satisfies its performance obligations prior to the submission
of invoices to the customer for such services. The Company's performance
obligation for hardware components that are purchased by the customer in
connection with the solution is delivery of the purchased device, which is
satisfied prior to invoicing. The Company provides a twelve-month warranty on
their hardware. All units deployed by the Company are past the twelve-month
period, thus the Company has not accrued for a warranty liability. The Company
generally collects payment within 30 to 60 days of completion of the performance
obligation and there are no agency relationships.
Revenue From Sales of Goods
Revenue from arrangements with customers is recognized based on the Company's
satisfaction of distinct performance obligations identified in each agreement,
generally at a point in time as discussed in ASC 606. The performance
obligations are satisfied upon shipment of the merchandise being sold.
20
Costs of Services Provided
Costs of services provided consist of data processing costs, customer support
costs including personnel costs to maintain the Company's proprietary databases,
costs to provide customer call center support, hardware and software expense
associated with transaction processing systems and exchanges, telecommunication
and computer network expense, and occupancy costs associated with facilities
where these functions are performed. Depreciation expense is not included in
costs of services provided.
Foreign Currency Transactions
The Company accounts for foreign currency transactions in accordance with ASC
830, "Foreign Currency Matters" ("ASC 830"), specifically the guidance in
subsection ASC 830-20, "Foreign Currency Transactions". The U.S. dollar is the
functional and reporting currency for the Company and its subsidiaries other
than the Indian subsidiaries whose functional currency is the Indian Rupee.
Pursuant to ASC 830, monetary assets and liabilities denominated in foreign
currencies are translated into U.S. dollars at exchange rates in effect at the
balance sheet date, with the resulting gains or losses upon settlement reported
in foreign exchange gain (loss) in the computation of net income (loss). Gains
or losses resulting from translation adjustments are reported under accumulated
other comprehensive income (loss).
Uncertain Tax Positions
The Company follows ASC 740-10, "Accounting for Uncertainty in Income Taxes".
This requires recognition and measurement of uncertain income tax positions
using a "more-likely-than-not" approach. Management evaluates the Company's tax
positions on an annual basis.
The Company files income tax returns in the U.S. federal tax jurisdiction and
various state and foreign tax jurisdictions. The federal and state income tax
returns of the Company are subject to examination by the IRS and state taxing
authorities, generally for three years after they were filed. Foreign income tax
returns are subject to examination by foreign taxing authorities.
Fair Value of Financial Instruments
ASC 825, "Financial Instruments," requires the Company to disclose estimated
fair values for its financial instruments. Fair value estimates, methods, and
assumptions are set forth below for the Company's financial instruments: The
carrying amount of cash, accounts receivable, prepaid and other current assets,
accounts payable and accrued expenses, stockholder advances, and short-term
financing approximate fair value because of the short-term maturity of those
instruments. The Company does not utilize derivative instruments.
Earnings (Loss) Per Share of Common Stock
Basic net income (loss) per common share is computed using the weighted average
number of common shares outstanding. Diluted earnings per share (EPS) include
additional dilution from common stock equivalents, such as convertible notes,
preferred stock, stock issuable pursuant to the exercise of stock options and
warrants. Common stock equivalents are not included in the computation of
diluted earnings per share when the Company reports a loss because to do so
would be anti-dilutive for periods presented. An uncertain number of shares
underlying convertible debt have been excluded from the computation of loss per
share because their impact was anti-dilutive.
Related Party Transactions
Parties are considered to be related to the Company if the parties directly or
indirectly, through one or more intermediaries, control, are controlled by, or
are under common control with the Company. Related parties also include
principal stockholders of the Company, its management, members of the immediate
families of principal stockholders of the Company and its management and other
parties with which the Company may deal where one-party controls or can
significantly influence the management or operating policies of the other to an
extent that one of the transacting parties might be prevented from fully
pursuing its own separate interests. The Company discloses all related party
transactions. All transactions shall be recorded at fair value of the goods or
services exchanged. Property purchased from a related party is recorded at the
cost to the related party and any payment to or on behalf of the related party
in excess of the cost is reflected as compensation or distribution to related
parties depending on the transaction.
21
Lease Obligations
The Company determines if an arrangement is a lease at inception. Operating
leases are included in operating lease right-of-use ("ROU") assets, current
portion of operating lease liabilities and operating lease liabilities, less
current portion in the Company's consolidated balance sheets.
ROU assets represent the Company's right to use an underlying asset for the
lease term and lease liabilities represent the Company's obligation to make
lease payments arising from the lease. Operating lease ROU assets and
liabilities are recognized at commencement date based on the present value of
lease payments over the lease term. For leases in which the rate implicit in the
lease is not readily determinable, the Company uses its incremental borrowing
rate based on the information available at commencement date in determining the
present value of lease payments. Lease terms include options to extend or
terminate the lease when it is reasonably certain that the Company will exercise
that option. Lease expense for operating lease arrangements is recognized on a
straight-line basis over the lease term. The Company has lease agreements with
lease and non-lease components, which are accounted for separately.
Results of Operations and Financial Condition for the Year Ended December 31,
2021 as Compared to the Year Ended December 31, 2020
Revenues
For the year ended December 31, 2021 compared to December 31, 2020, the
Company's revenues increased by $1,702,351, or 169%, from $1,009,949 in 2020 to
$2,712,300 in 2021. The increase is the result of the acquisitions of Rohuma and
Mimo as well as improvement in revenues as TRAQ Pvt Ltd. has started to emerge
from the effects of COVID which contributed higher revenue and the addition of
new customers in TRAQ Solutions, Inc.
Cost of Sales
For the year ended December 31, 2021 compared to December 31, 2020, the
Company's cost of revenues increased by $1,657,201, or 303%, from $546,569 in
2020 to $2,203,770 in 2021. The increase is the result of the acquisitions of
Rohuma and Mimo as well as added direct labor for TRAQ Pvt Ltd, and due to the
costs related to our sale of goods of approximately $938,000 in 2021. The
Company experienced lower gross profitability in these new engagements, as they
ramped up personnel post-COVID.
Operating Expenses
For the year ended December 31, 2021 compared to December 31, 2020, the
Company's salary and salary related costs increased by $1,447,153, or 509%, from
$284,258 in 2020 to $1,731,411 in 2021 due to the acquisitions of Rohuma and
Mimo as well as increases to management salaries including its CEO.
During the year ended December 31, 2021 compared to December 31, 2020, the
Company's professional fees increased by $613,402, or 305%, from $201,430 in
2020 to $814,832 in 2021. Our professional fees increased in 2021 compared to
2020 due to the acquisitions of Rohuma and Mimo as well as fees related to the
acquisitions of those companies, public offering expenses and the preparation of
the annual report.
For the year ended December 31, 2021 compared to December 31, 2020, the
Company's rent expense decreased by $69,758, or 68%, from $101,845 in 2020 to
$32,087 in 2021 due to TRAQ Pvt Ltd. renegotiating their leases in December
2020, reducing their space due to COVID.
For the year ended December 31, 2021 compared to December 31, 2020, the
Company's depreciation and amortization expense increased $30,220, or 63%, from
$47,988 in 2020 to $78,208 in 2021. The increase was the result of the
depreciation and amortization expense on the fixed and intangible assets
acquired in the Rohuma and Mimo acquisitions.
For the year ended December 31, 2021 compared to December 31, 2020, the
Company's general and administrative expenses increased by $2,621,799, or 1434%,
from $182,827 in 2020 to $2,804,626 in 2021 primarily due to the acquisitions of
Rohuma and Mimo as well as expenses related to stock-based compensation of
$2,433,150.
22
Interest Expense
For the year ended December 31, 2021 compared to December 31, 2020, the
Company's interest expense increased by $997,576, or 304%, from $328,380 in 2020
to $1,325,956 in 2021 due to higher levels of debt in 2021.
Derivative Liabilities
For the year ended December 31, 2021 compared to December 31, 2020, the
Company's change in the fair value of the derivative liability and derivative
expense increased by $1,077,387, from $0 in 2020 to $1,077,387 in 2021 due to
the convertible promissory notes and related warrants being classified as
derivative liabilities and the changes in the share price over the year ended
December 31, 2021. In addition the Company recognized a gain on extinguishment
of derivative liabilities of $1,089,675 in 2021 versus $0 in 2020.
Forgiveness of Debt and Other Income
For the year ended December 31, 2021 compared to December 31, 2020, the
Company's forgiveness of debt and other income decreased by $65,294 or 86%, from
$76,248 in 2020 to $10,954 in 2021 due to forgiveness of payables in TRAQ Pvt
Ltd in 2020 and due to PPP loan forgiveness of $24,640 in 2020. In addition, the
Company recognized a loss on the settlement of debt of $108,411 in 2021 and $0
in 2020, respectively.
Net Loss
For the year ended December 31, 2021 compared to December 31, 2020, the
Company's net loss increased by $5,845,454, from $(607,909) in 2020 to
$(6,453,363) in 2021 due to the changes noted herein.
Liquidity and Capital Resources
As of December 31, 2021, current assets were $980,747 and current liabilities
outstanding amounted to $10,825,016 which resulted in a working capital deficit
of $9,844,269. As of December 31, 2020, current assets were $784,914 and current
liabilities outstanding amounted to $3,953,160 which resulted in a working
capital deficit of $3,168,246.
Net cash used in operating activities was $3,163,103 for the year ended December
31, 2021 compared to $187,164 in 2020. Cash used in operating activities for
2021 and 2020 was primarily related to the loss in operations offset by
increases and decreases in accounts payable and accrued expenses and the changes
in accounts receivable due to the lack of adequate cash flow of the Company as
well as non-cash charges related to stock based compensation, the change in the
fair value of the derivative liabilities, gains and losses on extinguishment and
settlement of debt and the amortization of discounts related to our debt
instruments.
Net cash provided by (used in) investing activities was $20,941 for the year
ended December 31, 2021 compared to ($231,586) in the year ended December 31,
2020. Cash provided by (used in) investing activities for 2021 and 2020, related
to the advance in the form of a note receivable in the amount of $227,877 and
$3,417 in fixed asset additions in 2020 compared to cash paid for acquisitions
of $21,825 and cash received in acquisitions of companies of $48,789 as well as
acquisitions of fixed assets of $6,023 in 2021.
Net cash provided by financing activities for the year ended December 31, 2021
consisted of proceeds from the issuance of common stock and warrants of $494,545
and convertible notes of $1,715,000, along with proceeds received from related
party notes of $2,986,125 and $50,331 in proceeds from issuance of long-term
debt. The Company repaid $1,292,397 in related party notes, $515,615 in
convertible notes and $214,242 in long-term debt during the year ended December
31, 2021. During the year ended December 31, 2020 the financing activities
consisted of proceeds from related party and unrelated party notes of $752,480
as well as repayments of long-term debt to both related and unrelated parties of
$238,302. The Company had an increase (decrease) of its cash overdraft of
$30,539 and ($228,745).
23
On January 19, 2021, the Company issued a 12% Convertible Promissory Note to GS
Capital Partners, LLC (the "GS Note") in the principal amount of $125,000. The
GS Note has a maturity date of one-year from issuance and is to be repaid
commencing on the fifth monthly anniversary and every month thereafter in the
amount of $20,000. In the event of a payment default, the GS Note will be
convertible into common stock at a conversion price of 66% of the lowest closing
stock price over the previous 20 trading days. There are certain price
protections for GS Capital Partners, LLC under the terms of the GS Note, which
make the conversion option a derivative liability. The Company recorded an
original issue discount in the amount of $10,000 and $5,000 was paid out of the
proceeds for legal fees. In accordance with the terms of the GS Note, the
Company issued 3,250 shares of common stock as a commitment fee and issued
21,250 shares of common stock that are returnable upon the Company repaying the
GS Note in accordance with its terms. This note was paid off in 2021.
On February 12, 2021, the Company issued a 10% Convertible Promissory Note to
Platinum Point Capital, LLC (the "Platinum Note") in the principal amount of
$400,000. The Platinum Note has a maturity date of one-year from issuance. The
Platinum Note is convertible into common stock a conversion price of the greater
of (a) $0.08 or (b) 70% of the lowest traded stock price over the previous 15
trading days, provided that the conversion price will not exceed $8.00. There
are certain price protections for Platinum Point Capital, LLC under the terms of
the Platinum Note, which make the conversion option a derivative liability. The
Company granted 25,000 warrants to purchase shares of common stock that have a
term of three-years and an exercise price of $2.00 per share with the Platinum
Note. The warrants granted with the Platinum Note also contain certain price
protections that make the value of the warrants a derivative liability. The
Company and Platinum Point Capital, LLC entered into an amendment to exclude the
Mimo warrants granted on February 17, 2021 from the price protections. In
accordance with the terms of the Platinum Note, the Company issued 7,500 shares
of common stock as a commitment fee. This note was repaid/ converted into shares
of common stock in 2021.
Off-Balance Sheet Arrangements
We have no off-balance sheet financing arrangements.
Contractual Obligations
Not required for a smaller reporting company.
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